Labor Department Tells Employers how to Avoid Paying Overtime

by Christopher Getzan

Jan. 6, 2004 –
The Associated Press reports the United States Department of Labor is explaining to employers how to avoid paying overtime wages, while at the same time hawking reforms the Department says will guarantee increased wages for workers.

Methods the Labor Department suggest employers use to avoid paying workers overtime wages include a stricter adherence to the 40-hour work week; or raising workersâ€™ salaries to $22,100 the new annual threshold which makes them ineligible for overtime wages. Another option it suggests is to use a "payroll adjustment" to cut workersâ€™ hourly wages so that the combination of their hourly and overtime wage is equal to their original salary.

Tammy McCutchen, the Labor Departmentâ€™s Wage and Hour Division adminstrator, said that the "payroll adjustment" option allows employers to "maintain pay at the current level" with the new overtime requirements and is not a pay cut.

The Department of Labor told the AP it was only "listing well-known choices available to employers, even under current law."

"We're not saying anybody should do any of this," Labor Department spokesman Ed Frank told the AP.

The Labor Department admits that due to the new rules over 600,000 higher waged workers will lose their overtime eligibility, reports the AP, though the proposal itself puts this number anywhere between 1.5 million and 2.7 million. Labor unions estimate the number at closer to 8 million.

The reforms come at a time when Bureau of Labor Statistics and International Labor Organization data shows that the real hourly wage of American workers is almost the same today as it was thirty years ago, while Americans work almost 200 hours more per year. The net effect is that American workers are the most productive in the world, but, per hour worked, they are less productive and have less time off than workers in France, Belgium, and Norway. More recently, the USâ€™s economic recovery has increased corporate profits, done little to increase wages, which rose less than 2 percent last year.

According to the AP, the department proposed overtime changes in 2003 after complaints by employers about litigation costs stemming from lawsuits filed by workers claiming they were denied overtime benefits.